HDFC Securities' research report on Galaxy Surfactants
Q4 revenue declined by 10/8% QoQ/YoY to INR 9.7bn, owing to deteriorating volume and realisation for the speciality care business. Contraction in speciality care volumes was due to the slowdown in developed markets. Demand in India remained resilient and is improving for premium categories. Q4 margins: Gross margin improved 82bps QoQ and remained flattish YoY at 32%, owing to a decline in raw material prices. Operating expenses declined 7/18% QoQ/YoY owing to a reduction in freight cost and power and fuel cost. EBITDAM remained flattish QoQ/YoY at 14%.
Our BUY recommendation on GALSURF with a price target of INR 3,415 is premised on (1) the stickiness of business, as over 50% of the revenue mix comes from MNCs, and (2) the ability to pass on fluctuations in raw material costs to its customers. Q4 EBITDA/APAT were 10/7% lower than our estimates, mainly owing to a 7% fall in revenue, offset by lower-than-expected tax outgo.
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